MLR is confusing. It shouldn't be, but it is. Perhaps it is confusing because it was a rule created by those who did not have to implement it, or deal with the associated problems, particularly for employers.
Those that actually CREATE jobs vs. just talking about saving or creating jobs.
MLR seems to be simple.
Carriers are assigned loss ratio's based on line of coverage. If your loss ratio fails to meet the guideline you are required to issue a policyholder refund. If your loss ratio exceeds the mandate, you suck it up.
How difficult is that?
Complicated enough for carriers. How about employers?
Well . . .
Fortunately the DOL has issued this handy dandy technical release on how to allocate and distribute those wonderful MLR rebates.
If you have insomnia, this is highly recommended. It is effective and non-habit forming
So how do employers allocate and distribute the refund?
Funny you should ask.
First you need to remind yourself that those who wrote the law, issued the regs and then wrote the DOL technical release are not employers. They have never walked a mile in your shoes. They have no clue how to run a business.
They are government employees.
Not private sector employers.
However they did provide a "hotline" you can call if you have questions.
Burn that number into your mind. Put it on speed dial.
You will need it.
So how does an employer allocate the refunds?
You start by counting all covered participants during the PLAN YEAR that generated a refund. Not the calendar year (unless your plan follows a calendar year schedule), the plan year.
Include current employees that were covered as well as former employees. Don't forget those that may have only been covered for a few months. Include any employees that went on COBRA during the plan year.
If you had more than one plan from more than one issuing carrier during 2011 you will need to repeat this process for each carrier.
Of course you may have only received a rebate from one carrier, not both.
That is a good thing.
If you had COBRA participants from carrier A for the first 6 months of the year and you changed carriers, you need to calculate the refund separately for carrier A vs. carrier B.
This calculation also applies to active and former employees covered by two different carriers during the year.
Segregate those employees that only had single coverage from those that had dependents.
Calculate the rebate based on the percent of premium you (the employer paid) vs. the premium paid by the employee.
Now total up the MLR rebate from carrier A and allocate accordingly. Repeat this process for carrier B.
Issue refund checks (from each carrier) to active employees.
Now do the same for former employees.
Don't have a forwarding address for former employees? Issued a refund check and it came back addressee unknown?
Call (202) 693-8510.
Oh, did you have a Section 125 plan?
Let's just say the refund calculation is more complicated.
Besides, you have probably already dozed off . . .